Quarterly Strategy Update: Emerging Markets Equity with ESG exclusion

Links to the other Candoris Monthlies:

DSM US, Global, EME Growth         SIM US High Yield        Coho ESG US LC        PAM Senior Loans        VanEck EMD

 

Good morning *|FNAME|*,

June was a good month for EM Equities, especially for VanEck as it outperformed the benchmark again with 2.24% gross of fees. The VanEck EME strategy stays true to style as always, sometimes this results in a period of underperformance like in 2018, sometimes in outperformance like 2019 so far (outperformance of + 12.28%, VanEck +22.43% vs +10.15% for the MSCI EM IMI benchmark gross of fees!). Over the long run the philosophy and process (see below) works, as the strategy outperforms its benchmark with 4.37% annualized over the last 10 years (till end of June 2019 gross of fees).

The outperformance of the VanEck EME strategy has also been noticed by Morningstar, who ranked the strategy 2nd on YTD performance among EME Growth funds.
(Source of (Dutch) article: 
https://www.fondsnieuws.nl/nieuws/top-5-em-fonds-met-jonge-groeiaandelen-op-1)

The VanEck Emerging Markets Equity Strategy identifies companies with a structural growth at a reasonable price (“S GARP”). Persistent long-term structural growth opportunities exist in emerging markets. These opportunities are poorly captured by widely used benchmark indices. High growth is frequently overvalued and value stocks often remain cheap. Therefore, we believe achieving strong returns in emerging markets requires an experienced team using a disciplined approach to uncover structural growth at a reasonable price.

Please let me know if you like to learn more about the strategy: florian.bankeman@candoris.nl


 

Information



- Presentation VanEck EME

- VanEck EME versus peers

- EME outlook presentation

- Factsheet

- Commentary

- Kiid's

-
EME outlook presentation


I am traveling around to present the strategy on the following dates:

 

Fund Review
The Fund continued to perform well during the second quarter of the year despite discouraging macro and political backdrops.

The Fund’s outperformance during the second quarter was mainly driven by stock selection. The traditional overweight allocations to growth and size factors hurt the Fund’s relative performance as it both underperformed value and large-caps respectively during the second quarter of the year. On a country level, stock selection
in China far outweighed the negative impact from the country’s underperformance, helping the Fund’s relative performance most. Exposures in Indonesia and the Philippines also added value. On a sector level, exposures in the financials and industrials sectors helped the Fund’s performance most, while exposures in utilities and energy detracted. Stock selection in small-caps was a standout in the second quarter contributing most to the Fund’s outperformance.
Exposure is large- and mid-caps also added value.


Please click here for the complete Q2 performance review and outlook

 

 

Market Review
The tug-of-war between the potential ratcheting up of tariffs and technology war, lower global growth and the rapid shift to easing monetary policy globally continued to unfold in the second quarter. The rally in emerging markets and Chinese equities in 2019 was interrupted as trade tensions between the U.S. and China resurfaced. Emerging markets once again underperformed U.S. equities. On a country level, Argentina, Russia and Greece were among the top performers in the second quarter, while Pakistan, Hungary and China performed worst. On a sector level, consumer staples and utilities performed best, while healthcare and communication services performed worst.

The G20 meeting between President Trump and President Xi did little to alleviate investors’ concerns regarding protracted trade and tech wars and their implications on global growth. Furthermore, the industrial and manufacturing sectors in China continued to struggle to generate momentum. Consumption, on the other hand, remains robust helped by stimulus. We were encouraged by the strong growth in retail sales, and the continued determination of the Chinese government to support growth.

India performed generally in line with the Index during the second quarter helped by a late-quarter bounce as investors cheered the sweeping victory of the BJP party. Following the elections, we wait to see what the government will do about getting a business cycle going. For a number of years, its record on this front has been disappointing. It also faces a fiscal situation, which continues to be somewhat challenging.
Although the previous administration did have some successes, for example, the introduction of the GST (goods and services tax) and demonetization, there are still issues that need to be resolved. We
believe valuations in India remain on the expensive side not only on an absolute basis, but also compared to its peers in emerging markets.

In Brazil, all eyes remain on the progress of pension reform. It appears to be working its way through the system, albeit with a certain amount of horse trading and the usual political compromises. While
the original proposal will be watered down, we remain reasonably optimistic that progress will be made.


Please click here for the complete Q2 performance review and outlook

 

 

Since inception in 2006 the VanEck EME has had a higher upside market capture leading to an annualized outperformance of 2.5%

 

 

 

VanEck Emerging Market Equity Composite data                     VanEck EM Equity Fund Facts

Alpha

1.95

 

 

 

ISIN

IE00BYXQSM04

Beta

1.08

 

 

 

Benchmark

MSCI EM IMI

Std Dev

24.38

 

 

 

Bloombergticker

VEMKUI2

UMC

110.23

 

 

 

Currency

USD

DMC

101.55

 

 

 

Asset Class

Equity

Information Ratio

0.28

 

 

 

Region

Emerging Markets

Tracking Error

6.95

 

 

 

Dividend policy

Accumulating

Sharpe Ratio

0.28

 

 

 

 

 

 

Active Share

84.83%

as of 31-3-2019

 

 

 

 

Data as of 30-6-2019 source eVestment

 

Strategy overviewkey features of the fund

Investment Philosophy

VanEck believes in structural growth at a reasonable price, as High growth is frequently overvalued and value stocks often remain cheap.
 

Structural growth
Structural trends in company, sector, and country fundamentals:

  • Persistent, visible, and self-sustaining growth
  • Structural growth can be stock-specific or thematic, and can be driven by sustainable advantage, which is often company management
  • Deemphasizes cyclicality, opportunism, and inefficiency

Growth at a reasonable price (GARP)
The intersection of growth and value investing:

  • Avoids overpaying for obvious expressions of growth where valuations can be elevated, driven by opportunistic foreign investors and momentum driven domestic investors.
  • Avoids value traps that may be found in state-owned companies where significant obstacles inhibit the realization of value in emerging markets due to ownership constraints

Investment Process



Please
click here for a more detailed presentation about the Emerging Markets Equity strategy.

 

 

The VanEck Emerging Markets Equity Strategy identifies companies with a structural growth at a reasonable price (“S GARP”). Persistent long-term structural growth opportunities exist in emerging markets. These opportunities are poorly captured by widely used benchmark indices. High growth is frequently overvalued and value stocks often remain cheap. Therefore, we believe achieving strong returns in emerging markets requires an experienced team using a disciplined approach to uncover structural growth at a reasonable price.

 

Links to updated presentation and other documentation

Click to receive the information

- Presentation VanEck Emerging Markets Equity
- VanEck Emerging Markets Equity versus peers
- Factsheet
- Commentary
- Kiid's

 

 

Best regards,

 

 

Candoris Strategies: www.candoris.nl
Candoris Fund solutions: www.candoris-fundsolutions.com

 

* Performances are annualised. The latest data is still preliminary. Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate.. "This email is intended to be reviewed by only the intended recipient and may contain information that is privileged and/or confidential. If you are not the intended recipient, you are hereby notified that any review, use, dissemination, disclosure or copying of this email and its attachments, if any, is strictly prohibited. If you have received this email in error, please immediately notify the sender by return email and delete this email from your system."
If you don’t want to be kept up to date send a e-mail back via this link 
unsubscribe